# Gary & Co Ratio Analysis & Cost of Trade Credit

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1. Given the following data for Gary and Co (Millions of Dollars)

Balance Sheet Dec 31 200X

Cash $ 45

Accounts Payables $ 45

Marketable Securities 33

Notes Payables 45

Receivables 66

Other Current liabilities 21

Inventory 159

Total Current liabilities $111

Total Current Assets 303

Long term debt 24

Total liabilities $135

Net Fixed Assets 147

Common Stock 114

Total Assets $450

Retained Earnings 201

Total stockholders' equity 315

Total liabilities and equity 450

Income Statement Year 200X

Net sales $795

Cost of goods sold 660

Gross profit 135

Selling expenses 73.5

Depreciation 12

EBIT 49.5

Interest expense 4.5

EBT 45

Taxes (40% 18

Net Income 27

Calculate the following ratios:

Ratio

Average

Current ratio

Times interest earned

DSO

Inventory Turnover

Sales/Total Assets

Profit margin on sales

Return on Total Assets

Return on Common Equity

Hint: Use Net Sales of $795.

Days sales out is also called Days Sales Uncollected.

Show the formulas and numbers used in the calculations. Show calculations/formulas

2. Calculate the cost of trade credit given terms of 3/20 net 60

When performing this calculation why not use the number 100. Make sure to show the formula. Show calculations by hand as well.

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##### Solution Summary

The solution computes various accounting ratio's for Gary & Co and also find out cost of trade credit in another example.

##### Solution Preview

See the attached sheet for calculations.

Current Ratio = Total Current Assets/Total Currrent ...

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